New luxury housing tax rules lift segment

NARROWED DOWN:The new criteria will mean the tax applies to 2,900 units in 136 buildings instead of 10,400 units in 400 buildings, amid complaints about unfairness

By Crystal Hsu / Staff reporter

The Taipei City Government’s decision to raise the threshold for its luxury housing tax partially lifted weak sentiment for the luxury housing segment that has seen transactions stalling, but prices climbing because of scarce supply, analysts said yesterday.

Taipei, due to impose heavier tax burdens on expensive houses next month, introduced extra criteria on Monday evening to define upscale homes, which must cost at least NT$80 million (US$2.7 million) or measure more than 80 ping (264m2), the city’s chief tax official Huang Su-jin (黃素津) said by telephone.

The new standards are designed to reinforce existing criteria, including location, security, exteriors, nice views, construction material, parking space and others, Huang said.

The narrowed qualifications will cut its definition of luxury housing in the city to 2,900 units in 136 buildings, from 10,400 units in 400 buildings, Huang said, adding that most are located in Xinyi (信義), Da-an (大安), Zhongshan (中山) and Zhongzheng (中正) districts.

The stiffer thresholds came amid growing complaints about an unfair tax burden and they reduce tax income from luxury housing to NT$280 million this year, from the NT$500 million previously forecast, Huang said.

Under the new formula, luxury home owners will have to pay between 1.2 times and 2.8 times their current annual housing tax, estimated to be NT$240,000 for homes of 100 ping.

The policy change is positive for the luxury segment of the market, which has taken a tumble after the imposition of the special sales levy in June last year, analysts said.

Stanley Su (蘇啟榮), chief researcher at Sinyi Realty Inc (信義房屋), Taiwan’s only listed broker, said the tax increase was equivalent to a year of housing maintenance fees and was bearable for the super-rich.

“The levy will have a limited impact, to begin with, because it will affect less than 1 percent of nearly 900,000 houses in Taipei,” Su said.

“A stricter application will be greeted as good news following a series of unfavorable policies to curb property speculation,” Su added.

Greg Yeh (葉國華), head of the luxury home division at Evertrust Rehouse Co (永慶房屋), the nation’s largest realtor by the number of outlets, said luxury home transactions have improved over the past three months, but remain 50 percent lower than the levels seen last year.

Yeh said the special sales levy — up to 15 percent of trading prices on houses resold within two years of purchase — was to blame as it scared away investors, who made up 40 percent of the market.

To dodge the tax, luxury home-owners generally choose to postpone sales, pushing down already limited supply and shoring up prices, as seen in record prices for newly completed luxury homes, Yeh said.

A new luxury apartment complex built by CMP Group (勤美集團) in Taipei was reportedly sold at NT$3.04 million per ping, with two presale projects reportedly asking for NT$3.8 million per ping, according to a report in the Chinese-language United Evening News yesterday, which did not cite sources.